Brown’s Visit Behind the Orange Curtain

There’s been a lot of media coverage over Governor Jerry Brown’s visit two weeks ago to OCBC. Orange County overwhelmingly supported gubernatorial candidate Meg Whitman in the last election and it’s not often that the OC business community embraces the policy or politics of Sacramento. Having this Governor visit behind the Orange Curtain was a welcome departure from politics as usual.

And I gotta give the Governor credit where credit is due. He came, he met with 50 top OC CEO’s and business leaders, he presented his proposals for systemic reform, and he advocated his proposed November ballot measure, now gathering signatures to qualify, to temporarily raise sales taxes ½ cent for five years and raise annual income taxes for earners over $250,000. The funds would be used for education in order to avoid further cuts, he says.

OCBC doesn’t generally take positions on measures that haven’t yet qualified for the ballot so there is no support or oppose at this time. Brown’s proposal was rolled out on Tuesday so details are still missing. Our CEOs had an excellent meeting of Q&A with him. He has met with LA and San Diego biz groups this week as well.

But actually very little time was spent by the CEO’s on the tax proposal. Overwhelmingly, the Q&A time was dedicated to his reform proposals: education—specifically categorical spending reforms and testing reforms, a 12 point plan to overhaul government pensions, a strategy for updating the water delivery system for southern California, long term income tax reform to curtail the volatile state revenue stream too dependent on high wage earners, infrastructure investment and regulatory relief. If he can deliver on even a few of these, businesses would significantly benefit—clear evidence that elected leaders finally “get it” which would in return inspire businesses to invest, hire and grow. Reforms were what they were most interested in.

Unfortunately, the Governor’s tax proposal is not tied to, nor dependent upon, reforms. Further, there’s a strong argument to be made that more funding for education has not historically assured academic improvements. In fact, just the opposite. A 95% increase in education funding since 1968 has resulted in a 4% drop in SAT scores, according to the Cato Institute. More funding to a status quo education system cannot be the answer. Thus, the jury is still out and we will be watching in the coming months, encouraging that those reforms are not delayed.

Finally, OCBC is not an anti-tax group. Taxes have to be fair, understandable and good for business (like OC’s Measure M for transportation improvements). The Governor’s tax proposal will sunset in five years and is half what Governor Schwarzenegger’s was (which expired in 2010). I suspect with real reforms, and performance metrics, folks will look favorably on the proposal. Will we see more efficiency and effectiveness in education before November voting? Will we see real reforms that help restore the public trust? And will we see a true emphasis on improving the business environment to help grow the economy?

This will be an interesting debate. Count on OCBC to remain an active participant.